MUMBAI: The country’s construction, auto, chemicals and pharma sectors are expected to be the worst affected due to COVID-19, which carries the risk of global supply chain disruptions. Five import items that are heavily dependant on China — electrical machinery, machinery and mechanical appliances, organic chemicals, plastics and optical & surgical instruments — that make up about 28% of India’s import basket could be hit the most due to a potential shutdown, analysts say.
As a result, construction, transport, chemicals and machinery manufacturing could be affected, though the overall impact of COVID-19 on India’s trade is expected to be modest. There may not be much impact on the country’s exports as China accounts for just 5% of the country’s total outgo, but certain commodities like organic chemicals and cotton could face headwinds as they have a sizeable share in exports.
China accounted for around $73 billion, or 14%, of India’s total imports of $507 billion in FY18. China is the biggest source for imports, though its contribution to India’s total imports is less than one-seventh. The coronavirus is likely to keep factories and industrial hubs in China closed beyond February 17 when the Lunar new year holidays end until the epidemic is brought under control, leading to extensive potential production losses.
Among imports, organic chemicals is likely to be among the worst-affected commodities due to the crisis. India imports close to 40% of its organic chemicals from China, while other sources — US and Singapore, also depend on China to varying degrees, says a note from ICICI Securities.
India also imports 40% of its electrical machinery from mainland China, and with Hong Kong, its share goes up to 57%. Over half of India’s electrical machinery imports are likely to get impacted. Further, India imports almost one-third of its machinery and mechanical appliances from China, and a prolonged shutdown is likely to put 30-40% of machinery imports at risk.
For optical and surgical instruments, China is the largest supplier with a 16% share, hence these could be also impacted. Around 54% of India’s import basket is dependent on China — of which 28% is heavily dependent, and the remaining 26% has modest dependence. Import items among the 26% include iron, steel and inorganic chemicals. Plastics are also likely to be hit, although at a lower extent.
Domestic pharma companies could also face disruption if the crisis extends beyond three to four months, as key raw materials (active pharmaceutical ingredients — APIs) and intermediates are imported from China. For certain API used for anti-infectives, antibiotics, vitamins, anti-diabetes, dependence on China is 80-90%, industry experts say.
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